The Society for Economic Research on Copyright Issues

Review of Economic Research on Copyright Issues (RERCI)

RERCI Articles

The Spanish Copyright Commission (Section I) Within the European Legal Framework

Review of Economic Research on Copyright Issues, 14(1/2), 39-44, 2017

Raul Rodriguez


Abstract

Directive 2014/26/EC foresees that EU member States shall ensure that disputes between collective management societies and users concerning, in particular, existing and proposed licensing conditions or a breach of contract can be submitted to a court, or if appropriate, to another independent and impartial dispute resolution body where that body has expertise in copyright law. The Spanish Copyright Commission (Section I) aims to be that body in Spain. In order to reach this objective, the Commission has been empowered with new functions that will probably reduce the existing conflicts related to copyright licensing.

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Capabilities, Spillovers, and Intellectual Progress: Toward a Human Flourishing Theory of Intellectual Property

Review of Economic Research on Copyright Issues, 14(1/2), 1-38, 2017

Brett M. Frischmann


Abstract

Courts, commentators, and even casebooks mistakenly assume that intellectual property laws are fundamentally utilitarian and thus the relevant objective for intellectual property laws is maximizing social welfare. Economic theories of intellectual property dominate while rights-based theories and other alternatives struggle to remain relevant in the discourse. This essay accepts that intellectual property laws are consequentialist, but it mounts a challenge to the utilitarian theories that dominate. Following the path set by Amartya Sen in the area of development economics and borrowing heavily from the Sen's analytical and normative framework - the Capabilities Approach, this essay begins to develop a human flourishing theory for intellectual property.

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Introduction to RERCI Vol 14(1/2)

Review of Economic Research on Copyright Issues, 14(1/2), 0, 2017

Richard Watt


Abstract

Introductory comments to the present issue of the journal.

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Copyright Auctions and the Asset Value of a Copyright Work

Review of Economic Research on Copyright Issues, 13(2), 83-99, 2016

Ruth Towse


Abstract

Research on the economic history of copyright and music publishing turned up an unusual source of data on the value of copyrights, namely detailed accounts of public auctions of musical items that were held in London between 1794 and 1960 of, inter alia, copyrights and the engraved plates from which musical works were printed. The standard contract between song writers/composers and music publishers in the 19th century bought out all rights and therefore the sale of the plates was also the sale of the copyright to the work, enabling the new owner to print and distribute the work. The sales also facilitated entry into and exit from the industry.
This paper describes the historical circumstances of copyright and the market for printed music and presents some of the more notable data, with calculations of their present day values. Though insufficient for a full statistical analysis, the paper provides some hard evidence of the asset value of copyright in musical works as perceived by the music publishers of those times. The paper also suggests a basis for further research.

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The Use of Vertical Market Prices in Setting Copyright Tariffs and Rates

Review of Economic Research on Copyright Issues, 13(2), 66-82, 2016

Gerry Wall and Bernie Lefebvre


Abstract

With the lack of direct markets to examine, copyright setting agencies often adopt a total proxy approach whereby other markets are used to formulate benchmark prices. In this paper, we utilize a "downstream" market to estimate the value to a commercial "rights user" of distant television signals. This "partial proxy" approach has two advantages: it uses data drawn from the distant signal market (i.e. vertical market information) and it uses actual market pricing data from buyers and sellers of programming content.
Using this data, we derive estimates of the wholesale market value of distant TV signals. Based on our analysis we find that the current per signal payment to distant signal rights-holders (as certified by the Copyright Board of Canada) is less than the actual market value of those signals.

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Digital Rights Management and Hardware Market Power

Review of Economic Research on Copyright Issues, 13(2), 25-65, 2016

Jin-Hyuk Kim and Michael Waldman


Abstract

Digital Rights Management (DRM) is employed by firms as a way of reducing illegal copying. In this paper we investigate the idea that it can also be associated with an increase in market power in the hardware market. In our main analysis content and hardware are complementary goods, where there are multiple hardware sellers and one of the hardware sellers owns a DRM technology that can be developed into a DRM system that makes legal content incompatible with hardware that does not employ the system. Our primary result is that the hardware producer who initially owns the DRM technology may employ closed DRM to gain market power in the hardware market because this is an efficient way to monetize its initial ownership of the technology. We also show that, depending on whether or not the content developer has positive bargaining power, the introduction of DRM may or may not result in an increase in content development. In addition to investigating these ideas in a number of related theoretical settings, we also consider the social welfare aspects of the argument and discuss its relevance for understanding the early history of Apple's iPod.

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The Economics of Digital Goods: A Progress Report

Review of Economic Research on Copyright Issues, 13(2), 1-24, 2016

Paul Belleflamme


Abstract

I first review the theoretical apparatus that has been largely used so far to analyze information goods industries. I argued then that although this apparatus was fairly appropriate in the analog era and in the early digital era, it now needs to be significantly updated. The advent of streaming challenges indeed the main assumptions that underlie the existing models. This observation leads me to propose two main directions for future research efforts. First, one needs to better understand, and model, how streaming modifies the way content is accessed and consumed. Second, more attention should be given to the roles and strategies of streaming platforms, which become inescapable intermediaries regarding the distribution and consumption of digital goods.

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Is a Picture Worth a Thousand Words? The Division of Private Copy Remuneration between Authors of Text and Images

Review of Economic Research on Copyright Issues, 13(1), 29-60, 2016

Juan Santaló


Abstract

I propose and implement a method to divide the collection of private copy remuneration between the authors of text and the authors of images. I propose that the division should be based on the economic value added by text and images in the original work. Using a unique dataset of books and magazines copied in Spain, I estimate the economic value of each item, text and image, according to different characteristics of the written creative work. My estimates indicate that the average economic value of the images is between 6.35% and 20.00% of the average economic value of the text. These numbers are close to estimates that simply use the proportion of space occupied by images to proxy their economic value.

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Museums, Property Rights, and Photographs of Works of Art. Why Reproduction Through Photograph Should Be Free.

Review of Economic Research on Copyright Issues, 13(1), 1-28, 2016

Alain Marciano and Nathalie Moureau


Abstract

The law concerning the reproduction of works of art is unambiguous: the owner of the physical item does not own the right to copy and reproduce it. The copyright or right to reproduce a work of art either belongs to the artist and his/her heirs, or to everybody when the work is in the public domain. However, a large number of museums use their property rights to assume a copyright, i.e. a right to reproduce works of art. These illegal practices are the result of choosing a business model based on the desire to cross-subsidise the upstream market of the services provided to the public with the benefits obtained by monopolising the "downstream" market of the copies or reproductions of works of art. The objective of this paper is to show that this is not efficient. We argue that this strategy conflicts with the mission upheld by museums and prevents certain externalities from circulating in the society.

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The Efficiencies of Aggregation: An Economic Theory Perspective on Collective Management of Copyright

Review of Economic Research on Copyright Issues, 12(1/2), 26-45, 2015

Richard Watt


Abstract

The existing economic theory of copyright collectives, or copyright management organizations (CMOs) is strongly focused on the benefits of sharing of transaction costs. Here, we appeal to the contractual environment of CMOs to offer a different perspective. Copyright collectives form contracts at two principle points along the supply chain. First, there are the contracts between the collective's members themselves (the copyright holders) for distribution of the collective's income. And second there are the licensing contracts that the collective signs with users of the repertory. Using standard economic theory, the paper argues that there are significant efficiency benefits from having copyrights managed as an aggregate repertory, rather than individually, based on risk-pooling and risk-sharing through the contracts between the members themselves. Similarly, there are also aggregation benefits (at least in terms of the profit of the CMO) of licensing only the entire repertory, rather than smaller sub-sets. Both of these theses are defended by appealing to existing economic theory literature in related fields. Interestingly, there is a link between these two theories of the efficiency of aggregation which lies at the heart of the theory of syndicates, and the characteristics that imply that the group (or syndicate as a whole) can be considered as a valid "representative", sharing the same preferences as each individual syndicate member.

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Value Based Pricing of Music

Review of Economic Research on Copyright Issues, 12(1/2), 16-25, 2015

T. Randolph Beard, George S. Ford and Michael L. Stern


Abstract

In the regulatory setting of rates for statutory-licensed music services, the question of value-based versus cost-based rate setting for the component-rights of a musical performance arises. In this article, we have demonstrated this value-or-cost question is a distinction without a difference. Starting with the value-based concept of second-best (or Ramsey) prices, we end with a result prescribing that cost differences should be fully reflected in compensation across the inputs to the music recording. Each price is set so that the costs are covered, no more and no less.

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Royalty Rate Setting for Sound Recordings by the United States Copyright Royalty Board: The Judicial Need for Independent Scholarly Economic Analysis

Review of Economic Research on Copyright Issues, 12(1/2), 1-15, 2015

David R. Strickler


Abstract

Judges who set copyright royalty rates through litigation, like all trial Judges, are constrained by the evidence and testimony. Thus, we can only determine rates that are supported by the record. For the record to be sufficient, testifying economists must be able to apply a sufficient body of work in the economics of copyrights. In my address to the 2015 SERCI Congress, I emphasized the judicial need for continued and comprehensive research in this field, so that testifying economists can provided a foundation for our determinations. In this article, I explore such issues in more detail.

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Europe's Lost Royalty Opportunity: A Comparison of Potential and Existing Digital Music Royalty Markets in Ten Different EU States

Review of Economic Research on Copyright Issues, 11(2), 60-91, 2014

Roya Ghafele


Abstract

A comparison of existing online revenues collected from digital music licenses and the potential royalty market for online music, suggests an inadequate royalty market capture within the European Union. An estimate of the 2012 market for digital music royalties in ten different E.U. countries indicates this market could have been well over €18 billion. However, only €116 million were reported by corresponding Collective Rights Management Organizations in that same year. The three largest digital music royalty markets (U.K., Germany and France) comprise around €11 billion. Yet, the corresponding Collective Rights Management Organizations (PRS for Music, SACEM and GEMA) generate only €95 million in royalty revenue from all online media. The gap between existing and potential royalties is tremendous and suggests that E.U. Member States have not come to grips yet with the internet. Their existing business models, paired with a regulatory environment rooted in the 19th century rationale of the Berne Convention has not been supportive of grasping the opportunities provided by a disruptive technology. By consequence, artists do not receive the royalties they deserve, commercial users are exposed to prohibitive license fees and non-commercial users suffer from adequate legal alternatives to digital piracy.

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The Winds of Change. Journey of UK Music from the Old World to The New World

Review of Economic Research on Copyright Issues, 11(2), 27-59, 2014

Maurice C. Samuel


Abstract

Digitisation and adoption of increasingly fast broadband Internet represent the two fundamental 'winds of change' that have transformed the UK music industry since the 1980s. This paper examines the impact of these changes on sales of music and, by extension, on the royalties of creators of music, in both nominal and real terms. It identifies weaknesses and threats in both, opportunities that might be developed as responses, and possible hypotheses for future economic research that are likely to be of interest to the sector in providing evidence in the debates around appropriate strategies and policies.

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Copyright Licensing Under Asymmetric Information

Review of Economic Research on Copyright Issues, 11(2), 1-26, 2014

Inés Macho-Stadler and David Pérez-Castrillo


Abstract

In this paper we aim to contribute to the discussion on the role of royalties in copyright agreements by concentrating on the incentives that they provide to the creator and the intermediary when the success of the work depends on their involvement with the commercialization process. We also consider the effect of this moral hazard on the matching among creators and intermediaries and their gains.

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